Bank7 Corp (BSVN) 2025 Q4 法說會逐字稿

Welcome to the Bank7 Corp., fourth quarter and full year 2025 earnings call. Before we get started, I'd like to highlight the legal information and disclaimer on page 27 of the investor presentation. For those who do not have access to the presentation, management is going to discuss certain topics that contain forward-looking information, which is based on management's beliefs as well as assumptions made by, and information currently available to management.

Although management believes that the expectations are reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will prove to be correct. Such statements are subject to certain risks, uncertainties, and assumptions, including, among other things, the direct and indirect effort -- effect of economic conditions on interest rates, credit quality, loan demand, liquidity, and monetary and supervisory policies of banking regulators.

Should one or more of these risks materialize, or should underlying assumptions proven correct, actual results may vary materially from those expected.

Also, please note that this conference call contains references to non-GAAP financial measures. You can find reconciliations of these non-GAAP financial measures to GAAP financial measures in an 8-K that was filed this morning by the company.

Representing the company on today's call, we have Brad Haines, Chairman; Tom Travis, President and CEO; J.T. Phillips, Chief Operating Officer; Jason Estes, Chief Credit Officer; and Kelly Harris, Chief Financial Officer; and Paul Timmons, Director of Accounting.

Please also note, today's conference is being recorded.

With that, I'd like to turn the call over to Tom Travis. Please go ahead.

Thank you. Good morning to everyone. We are delighted with our 2025 results. It seems like a broken record every quarter. But we have to acknowledge the great work done by our bankers and especially this year. The outstanding loan growth, the strong loan fee income, and very solid organic deposit growth is not easy to do, and we are very fortunate to have such a dynamic and professional group of bankers, people that have worked together for a very, very long time. And so always, always appreciate what they do and especially this year.

And at the same time while they were producing that tremendous growth in the loan fee income, they did it without sacrificing underwriting and that enables us to really enjoy asset quality, that is probably better than it's ever been.

And it's also why we felt comfortable not increasing the provision more than we did this year or last year, even though we made such tremendous strides in the growth. So, just again, a real congratulations and shout out to our great team.

And at the same time, our operations, IT, finance functions continue to evolve and they make our lives easy and something we don't take for granted. So we want to thank and acknowledge the leadership in those functions as well.

So we're well positioned to continue performing at a very high level and we're here to answer any questions anyone might have. Thank you.

(Operator Instructions) Woody Lay, KBW.

Hey. Good morning. guys.

Morning, Woody.

I wanted to start on one growth, another really strong quarter of growth. I know in the past, we talked about sometimes growth is bumpy quarter over quarter, but we never really saw the downside in 2025. Has payoff activity been lighter than you expected and how should we think about forward expectations for growth?

Woody, this is Tom. Before Jason jumps in, I just want to tell you I love the way you start your piece when you send it out. I opened your -- early this morning and you start out with rock and I like that. So thank you. Jason will take the question.

Hey, Woody. It's interesting you bring up the payoffs because we study this every quarter. We try and look at originations and pay off volumes. And not to sound like a broken record, but we're doing a lot of business in Oklahoma and Texas. And those economies, we're just thriving in this part of the country, okay? And so, we had I would call it accelerated payoffs throughout the year.

There was just so much demand and loan opportunities. And look, part of it is that geography and part of it is our team, and so we're over here now with some more scale and I'll just liken it to the snowball rolling down the hill, right?

And so now, each year when we start, January and you just -- you know your payoff pace is going to be a lot, okay? Like I think we'll have $25 million a month of payoffs this year. So to grow, we need $35 million, $45 million a month of new funding, and so last year was no exception.

I will say that the fourth quarter payoffs were lighter than they'd been in the first, second, and third. You're going to see some of that come in in the first quarter, but we're really, really fortunate, and very focused on making sure we go out and capture market share in these dynamic Oklahoma City, Tulsa, Dallas, Fort Worth metroplex.

I mean, we are after it every day with really talented people, and it's not just on the loan side. As great as it looks on the loan side for last year, we actually did better on the deposit side and it's just a -- it's a great testament to the team and how hard they worked last year and just great results.

Yeah. That's a helpful color. And then, I mean, I guess just a follow-up there, knock on wood, but it feels like the momentum in your local market is continuing to be strong in 2026. I mean, can gross look like '25 again in the year ahead, or would that be a little bit of a stretch?

That sounds like a stretch to me. Where we're seeing the most pressure is pricing wise and we are not going to lose our discipline, Woody.

So we are weekly meeting with clients, talking to bankers, and we're trying to make sure we're within market and we are doing our best job of maximizing these loan dollars. Because we do think that we could grow loans at a similar pace, but you have to fund that, and you have to maintain those margins and so we're balancing those items.

Yeah. And then last year me just wanted to ship over to the net interest margin, and got some compression this quarter, which I don't think was a huge surprise given that some of the commentary you gave last earning's call. But can you talk about how you expect the margin, the trend if we get a couple additional cuts from here? And remind us the historical ranges you would expect on the NIM?

Before Kelly jumps into that, Woody, I would just a quick reminder that the slight compression that we experienced was we were coming off of almost an all-time high. And we tried to signal that last year. We knew we were running at a higher margin still within our historicals but really way up there in the range and so we need to be mindful of that, but go ahead, Kelly.

And Woody, we had a couple of rate cuts during the quarter, and you can tell in the slides on the deck that we've kind of reached an inflection point where we had a number of of loans reach their floors and so I think if you -- on a forward-looking basis, using that with the loan growth, I mean, we feel really good about our current NIM.

Could it go down slightly? Potentially. We do have some time deposits that are repricing during the quarter. It would help offset some of that. And so I think, going within that high band. 4.45% is a great starting point for us.

What was our historical low? Was it around 4.15% or 4.20%, Kelly?

4.35%.

Yeah. Yeah. Well, listen, if we get 75 basis points of cuts and we put a lot of material in this deck. Let me specifically on page 10, there's a good illustration. But we've always said the more, the deeper the cuts are, the more challenging it becomes, and loan floors really help us, but then the depositors at the same time are insisting on higher rates.

And so I think we've said in the past -- in the recent past, it wouldn't surprise us to dip down and touch our historical lows, which is below the number that Kelly said, but it's not to be -- it wouldn't surprise us if it bled down a little further.

Got it. All right. Well, that's all from me. I appreciate all the color.

Nathan Race, Piper Sandler

Hey, guys. Good morning. Thanks for taking the questions.

Hey, Nate.

Good morning.

Just thinking about the direction of deposit costs going forward. I appreciate the comments earlier around having some opportunities to reduce CD pricing going forward but wondering if you could speak to the non-maturity side of the deposit equation in terms of how much additional leverage you have to reduce those deposit costs and what that implies for deposit competition these days?

Hey, Nate, this is Kelly. Our current cost of bonds dipped from Q4, and the current run rate is 2.40%. I think that's going to be really driven off of balance sheet growth, incoming new deposits. We did pick up a couple of nice deposits post year-end that helped reduce that cost of funds. And so I think it ebbs and flows. I don't know if there's really a straight answer to give you.

Okay. That's helpful. And maybe for Jason, if you could maybe just speak to some of the deposit pricing competition you're seeing out there. Obviously, you had really strong loan growth in the quarter. So you had to fund that with deposits. But just curious what you're seeing across the ground.

Yeah. I think it's fair to say the last couple of cuts didn't really flow into deposit betas as strongly as maybe the first couple. And that's not, I don't think, unique to Bank7. I think that's just kind of across the industry. If you go out to the Internet and just look at what's available, money market, CDs, it's just -- clearly, you're hitting a point where the depositors are keenly aware now, right?

Interest rates are top of mind and that was a little bit easier 12 months ago, 18 months ago, but as these cuts have taken place, people are just paying attention to it. And so are we, and we're trying to make sure we're getting our share -- market share. So I think to your point or your question of what are we seeing real time, and I think it's tough on the deposit side. Those last two cuts didn't really translate into typical betas.

Understood. That's really helpful. And then maybe one last question for Tom, maybe just zooming out a bit. I think 2025 was a tough year. It's just looking at the performance of the stock relative to peers. So just curious, you guys are still building capital at nice clips despite even the strong growth you had in the fourth quarter and throughout last year. So just curious if you're thinking more about buybacks to support the stock these days or just more broadly how you think about excess capital?

Yeah. Regarding the stock price, it's -- we've always -- everybody knows on this call and around the world that markets are going to do what the markets are going to do, and we really can't control that. Obviously, we can control it a little bit if we wanted to go and repurchase shares, which is not our objective. And we understand it's one of the levers in addition to others. But we're just focused on producing top-tier results. And over time, the market will understand that, and the stock price will respond.

And I think the proof is in the pudding. I don't know what page it's on the deck. But if you look at our total shareholder return compared to the major exchange traded banks or if you want to compare it to the KBW Index, we are just top, top, top tier. So there's going to be quarters and times where we don't look favorable compared to other banks, but that's okay because over time, we're going to outperform them, and the market will understand that.

Got it. I appreciate all the color. Thanks, guys.

(Operator Instructions) Jordan Ghent, Stephens.

Hey. Good morning. I just had a question following up on that capital. And regarding M&A. In the past, you guys have mentioned sellers having high pricing valuation expectations along with an AOCI overhang. Are those still some of the biggest headwinds you guys are seeing as more sellers come to the table and willing to negotiate?

I think the AOCI has slightly come down. Many, many of the people that were burdened with that, I think they were using hope as a strategy, and they believed some of the wishful thinking that the rates are going to come down and reality is really here.

And then as it relates to other factors, there is still -- if you run across a quality deposit franchise, it's going to be very difficult to buy that kind of operation. I don't want to use the word bargain, but it's just increasingly difficult, and the market is a mature market. It's an efficient market and it recognizes that value.

So I think all of those things are going to always be in play, and we're scouring the country side. We had a couple of opportunities over the last year in Oklahoma. One, it was -- didn't quite make it at the end. One, we were ready to go, but we didn't -- we pulled away after doing our diligence. We had an out-of-market good opportunity that we also pulled away from.

And so there's -- it's never the same. But to your question about being able to make things work, we're going to stay very, very disciplined. And obviously, we're not even going to -- when it comes to asset quality, that's non-negotiable, right? But as it relates to price, the higher quality as the deposit franchise, the long in the tooth deposit relationships that some banks have, that's going to force you into a higher multiple and there's just nothing you can do about it.

So while we're out talking to people, it's a high-class problem, but the capital is just going to continue to pile up. And the good news about that is that it gives you more optionality when you finally do find something. And so I think for us, it's going to be stay disciplined, resist the urge to do any meaningful share buyback so that we can pile up capital and just be prepared for a nice opportunity.

And we've mentioned that we're not opposed to an MOE. And so it's a really good position to be in, but we also understand that we have to fade the heat because the capital is piling up so rapidly that the return on equity has come down.

But the last thing I would say is that that return on equity may be coming down, but I don't know what the percentage of banks is, but I bet it's greater than 90%. I would love to have their capital ratio returns go down to 18% or whatever it is. So that's why I call it a high-class problem.

Perfect. Thank you for that. And then, just one follow-up question on the deposits on the -- particularly the non-interest-bearing. Looks like it kind of went down a little bit this quarter. And could you maybe give a little color on that and then maybe remind us of any seasonality that we should be expecting with the -- on the deposit side in 1Q?

Yeah. I think what you're seeing as those noninterest-bearing accounts, that percentage bleeds down, go back to my comments a minute ago about top-of-mind awareness. When rates were zero, nobody cared if it was a money market account, a savings account, or a checking account because it just didn't matter, and that's changed with the last rate cycle. And it's just a thing that people are aware of, and we accept that, and we're responding to what the customer wants in that regard.

I don't think that we're not heavy, heavy in public funds, those are seasonal with regard to seasonality. Those balances do fluctuate. But other than that, I don't think we have much seasonality in the portfolio.

Okay. Perfect. And then just one more question on the expense and fee guide. If you guys could give any additional commentary on that, on what you're seeing? And then maybe just remind us of how many more quarters we can expect to see impact from the oil and gas revenues?

As it relates to expense, it's nice and comforting that two of our three primary coverage people, I read their pieces this morning, and it's nice to see you recognize how good we are at controlling expenses. That's not going to change.

As it relates to the oil and gas, with all due respect, we think it's a nothing burger. It's a -- I don't know if I want to call it a rounding error, but for the next -- unless we were to sell the asset for the next three or four years, it's just going to be a gradual decline of any meaningful dollars as we harvest the revenue.

And so -- and as a reminder, we didn't really agree with our accountants 1.5 years ago when they were using their formulas to recognize the revenue off the oil and gas, and we warned people that, from a GAAP perspective, that we felt like they were front-end loading it too much. And I still think that exists.

And so from a strategic perspective, we've accomplished our goal. We continue to harvest, and we're happy with it. But from a GAAP accounting perspective, it's going to continue to be a very insignificant portion of the bank, but we do recognize that we might have some fluctuations. And so from a GAAP perspective, it could negatively impact net income in a small, immaterial way.

And from a dollar's perspective, using Q4 as a really solid guide, I think it was $9.1 million in core expense, $1 million in oil and gas. And then similar on the fee income side, $1 million split, $1 million on the oil and gas, and $1 million in core fee income, $2 million in total. Very, very similar to Q4.

Perfect. Thank you for that answer. And that's it for me.

Thank you. That concludes the question-and-answer session. I would like to turn the conference back over to the company for any closing remarks.

Thank you to everyone for your coverage and any shareholders that are on the line, we're excited about 2026 and our company and we appreciate the partnership. Thank you.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.